SCI likely to opt for alliance with GAIL

Shipping Corporation of India may form an alliance with GAIL India Ltd instead of a joint venture for the latter foraying into liquefied natural gas shipping, a top official of SCI said. The alliance will be on similar lines that SCI has with ONGC where it manages the latter’s manage-and-operate the offshore support vessels.

Initially, SCI was to set to form a joint venture with GAIL when the latter in last December signed a sales and purchase agreement for sourcing LNG from the fourth production train of the Sabine Pass project for a period of 20 years. Production at the fourth train is expected to start in 2017.

India, the world’s eighth-largest LNG importer, has two operational LNG importing facilities along its western coast. Several new LNG projects are either under construction or are being planned in the country.

Shipping Corporation of India is cash-strapped following weak freight rates, and hence has delayed the delivery of some of the vessels on order, shipping analysts said.  Hence it might have decided to avoid a joint venture, which calls for an investment with GAIL and preferred the alliance mode where it will only operate the vessels for a fixed fee instead of return on investment, the analysts stated.

LNG shipping, on the other hand, would be a major diversification for the State-owned GAIL, keeping in mind the capital intensive nature of the business as also the cyclical nature attached to shipping.

SCI, the only Indian shipping company that has presence in the LNG transportation business, holds the key as LNG shipping requires specialised handling capabilities and is seen as more difficult than conventional shipping.

Currently, SCI co-owns and manages three LNG ships and is hopeful that considering that all future LNG projects, whether it is GAIL, IOC, ONGC or Petronet, it will have a head-start, the official said.

 It holds 29.08% stake in two joint ventures with the rest being held by Japanese Shipping line and a Qatar shipping line with one vessel each at Malta and chartered with Petronet LNG on a 25-year time charter. It also has a third joint venture with the same shipping lines with 26% stake.

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